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Long Island Power Authority (Photo credit: Wikipedia)

As the tri-state region gradually recovers and rebuilds from the disastrous effects of hurricane Sandy, one cannot help but pause for a minute to thank and appreciate all the public officials, volunteers, electric utility employees and guest crews who worked around the clock cleaning up neighborhoods. Installing electric power has been so essential for the function of our daily and business lives.

At the same time, one must study carefully Sandy’s test of the current electric utilities’ business model, wherein states grant monopoly licenses to one large company to provide electricity to millions of people.

Is a single large company the most efficient and effective way of providing electricity, and of coping with such emergencies as the one posed by Sandy this year, Irene last year, or Gloria a long time ago.

Judging from my immediate experience, response to a column I posted a few days ago here, and media coverage of the power situation, I see two problems with the current model:

First, size. Placing the utility needs of millions of people in the hands of a company like LIPA, a division of UK-based National Grid (NYSE:NGG) may cut the production and distribution costs of electricity, due to “economies of scale,” but it doesn’t necessarily guarantee that the benefits of that economy of scale will be passed on to customers -- rather than to unions and corporate bureaucracy.

Another issue of size is this: having a large corporate organization creates communication inefficiencies that make it almost impossible to address the needs of each local community effectively—in spite of all good intentions. LIPA, for instance, doesn’t seem to have been able deal more effectively with Sandy than smaller power corporations that serve single communities like Freeport and Rockville Centre.

The second problem is this: the absence of the discipline of the market. Since LIPA is a regulated monopoly, the company has no pressure from competitors to modernize by investing in new technologies and new ways of distributing electricity -- unlike the case of Verizon (NYSE:VZ), which in the last decade had to replace 100 years old copper wires with fiber optic cables to fend-off competition from Cable Vision (NYSE:CVC).

It still remains a mystery to me, for instance, why LIPA has yet to lay underground wiring in inland neighborhoods, where flooding isn’t an issue with this system. Is it a cost issue? Is it a state regulation issue? Is it a low priority issue for LIPA’s leadership?

I cannot say for sure. What I can say for sure, however, is this: We cannot afford to be in the dark and the cold for too long. The time may have come for local communities to consider the need for a new business model.